Catastrophic plans on the exchange so far have attracted few enrollees, according to insurers and recent state exchange reports. But that could change following President Obama’s decision last month to let anyone who had their individual policies canceled in 2013 claim a “hardship exemption” and purchase a catastrophic plan, which initially had been restricted to those under the age of 30 (HRW 12/13/13, p. 1). What that means to insurers’ bottom lines, however, is still playing out in the early days of the 2014 coverage year, experts tell HRW. In fact, consumers who lost their coverage may have little financial incentive to purchase a catastrophic plan in light of the many bronze-tier plan options, which have similar prices but provide richer coverage.

For insurers, the financial impact of extending the age limit for catastrophic plans is a mixed bag, says Neil Waldron, chief marketing officer and vice president of strategic initiatives at Rocky Mountain Health Plans in Colorado.

“If a carrier assumed they will obtain a more favorable health risk under their catastrophic plans, their catastrophic plans may not be adequately priced for older individuals,” he tells HRW. “However, not all carriers made this assumption.”

Under the Affordable Care Act (ACA), catastrophic plans must cover all essential health benefits and preventive services. The reform law also requires a 57% actuarial value, which is nearly identical to the 60% AV required for bronze plans. Consumers, however, cannot get premium subsidies or cost-sharing reductions when purchasing a catastrophic plan.

The White House’s decision to let individuals over 30 purchase catastrophic coverage may do little to address people’s concern over the price they must pay for ACA-compatible plans, Waldron says.

“The ACA catastrophic plans are actually richer in benefits than many policies sold prior to 2014,” he says. “Also, plans sold prior to 2014 were generally not required to offer their plans on a guarantee-issue basis. The combination of these two factors means that for many individuals the catastrophic plan will be more expensive than their 2013 plan.”

In fact, most people enrolling in the Rocky Mountain plans are steering clear of catastrophic coverage and selecting mainly silver-level options, Waldron says. This trend is borne out elsewhere. California, for example, reported last month that only 1% of enrollees chose catastrophic plans, versus 20% for bronze and 61% for silver.

Catastrophic and Bronze Premiums Are Similar

Many catastrophic and bronze-level plans, in fact, have comparable premiums, according to an HRW analysis of plans in several large states (see table, this page). The similarities also extend to the annual out-of-pocket (OOP) caps and deductibles.

In Washington state’s King County, for example, Group Health Cooperative is offering a bronze plan to a 25-year-old nonsmoker that has a $167.02 monthly premium along with a $5,000 annual deductible and a $6,350 annual OOP cap. This plan also has a $40 copayment for a primary visit and 40% coinsurance on brand and generic drugs. By contrast, Group Health also sells a catastrophic plan to the same individual with a $175.34 monthly premium, as well as a $6,350 deductible and a $6,350 OOP cap. A person choosing this option would have to pay the full price for doctors’ visits and prescriptions until the deductible is met.

John Greene, vice president of congressional affairs at the National Association of Health Underwriters, says the catastrophic plan option was built into the ACA for highly price-sensitive young people. But a broker or agent will steer a person to the best plan they can afford, he says. “If it’s the lower-cost bronze, then that’s what they’ll recommend,” he tells HRW.

Greene also sees limited underwriting risks to insurers that might attract more members to the catastrophic plans under the Obama administration’s new rules.

“Plans tend to pool their groups together anyway,” he says. “For example, they’ll take all of their small group business and put it all together; it’s the whole pool. In the individual market, they pool all of the individual risk they have together that they have in their plan.”

Catastrophic vs. Bronze Premium Rates For Selected States

California1

Bronze

Catastrophic

Difference

Lowest

$147

$117

$30

Average

$207

$179

$28

Highest

$274

$247

$27

Florida2

Bronze

Catastrophic

Difference

Lowest

$128.12

$85.81

$42

Average

$222.17

$175.70

$46

Highest

$330.12

$256.83

$73

Michigan2

Bronze

Catastrophic

Difference

Lowest

$126.58

$104.78

$22

Average

$207.65

$164.50

$43

Highest

$301.57

$243.54

$58

New York3

Bronze

Catastrophic

Difference

Lowest

$217.83

$134.63

$83

Average

$357.10

$259.57

$98

Highest

$602.40

$425.02

$177

Ohio2

Bronze

Catastrophic

Difference

Lowest

$151.98

$113.78

$38

Average

$215.63

$153.59

$62

Highest

$322.66

$202.28

$120

Texas2

Bronze

Catastrophic

Difference

Lowest

$108.53

$98.03

$11

Average

$178.64

$170.23

$8

Highest

$280.00

$199.00

$81

1 Based on rates for a 25-year-old individual.2 Based on rates for a 27-year-old individual.3 Based on rates for an individual of unspecified age.
SOURCE/METHODOLOGY: Compiled by AIS from premium data in AIS’s Health Insurance Exchange Directory and Factbook, now shipping from AIS. For more information or to order, call (800) 521-4323 or visit http://AISHealth.com.

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